EMEA Morning Briefing : Trump Pauses Effort to Partially Reopen Strait of Hormuz

MARKET WRAPS

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Eurozone PPI, Services PMI for eurozone, U.K., Germany, France, Italy; France industrial production; trading updates from Novo Nordisk, Infineon, Lufthansa, BMW, Daimler Truck, Philips, Veolia, Wolters Kluwer, Orsted, Next, Adyen

Opening Call:

European stock futures traded higher early Wednesday. Asian stock benchmarks were up; the dollar weakened; Treasury yields were flat; while oil futures fell and gold strengthened.

Equities:

European stock futures point to a higher open, after gains in semiconductor stocks sent the Nasdaq composite and S&P 500 to record highs.

The PHLX semiconductor index has risen 54% since the end of March, its best performance over a 25-day period since March 2000. Chip makers are racing to meet surging demand for the specialized devices that are pivotal to powering artificial intelligence.

Companies that design, produce or sell the computer chips needed for intensive AI tasks are the biggest beneficiaries of the massive AI infrastructure build-out, said Ohsung Kwon, chief equity strategist at Wells Fargo Securities.

"That's really where the bottleneck is," he said.

Forex:

The dollar lost ground on risk-on sentiment, after President Trump paused his latest effort to partially reopen the Strait of Hormuz to buy time to reach an agreement to end hostilities with Iran.

"Great Progress has been made toward a Complete and Final Agreement with Representatives of Iran," President Trump said in a post on Truth Social. Trump also said that the U.S. blockade of Iranian ports will continue.

There's elevated risk appetite, partly because oil prices have declined, said Joseph Capurso, CBA's head of foreign exchange, international and geoeconomics.

Bonds:

Borrowing costs on U.K. 30-year government bonds hit a 28-year high ahead of local elections on Thursday. Prediction markets indicate that the ruling Labour party could perform poorly at the elections, triggering a potential leadership contest for the prime minister role.

"Political uncertainty translates into higher term premia, higher yields and ultimately a higher cost of borrowing for the U.K.," Aberdeen Investments' Luke Hickmore said in a note.

Energy:

Oil fell on hopes of a U.S.-Iran peace deal that could reduce supply disruptions.

The "strait could be closed indefinitely as Iran keeps a chokehold on 20% of the world's oil supply, but with it comes hope of a deal," said Matt Simpson, senior market analyst at StoneX.

"The latter part seems to carry more weight," Simpson added, given that U.S. stock futures were moving higher.

Metals:

Gold futures strengthened amid easing Middle East tensions, analysts said.

"President Trump's announcement to temporarily pause a U.S.-led plan to provide safe passage for vessels through the Strait of Hormuz," has eased these tensions, CBA's Vivek Dhar said.

An "upward shift in gold will likely be driven by any cease-fire hopes in the Middle East, market pricing of rate cuts as high energy prices weigh on global growth and Fed independence concerns," Dhar added.

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Aluminum edged lower in early Asian trade, but remained at elevated levels.

Prices are likely to be supported by ongoing disruptions to supply from the Persian Gulf, which accounts for nearly 10% of global supply, ANZ Research said. Inventory held in London Metal Exchange warehouses has fallen 22% since the conflict escalated in late February, it added.

TODAY'S TOP HEADLINES

AI Models Face U.S. Review Before Launch. What It Means for Tech Stocks.

As former President Ronald Reagan once put it, the nine most terrifying words in the English language are "I'm from the Government, and I'm here to help."

This time the government wants to help by previewing new AI models from major tech companies.

U.K. 30-Year Gilt Yields Hit 28-Year High Amid Political Concerns

Borrowing costs on U.K. 30-year government bonds surged ahead of local elections on Thursday due to concerns about a potential political crisis in the U.K.

Prediction markets indicate that the ruling Labour party could perform poorly at the elections, triggering a potential leadership contest for the prime minister role.

Gulf States Fear an Emboldened Iran Is Taking Advantage of a Hesitant U.S.

DUBAI-President Trump chose to look the other way after Iran launched three salvos of missiles and drones into the United Arab Emirates, one of America's main Middle Eastern partners, despite a cease-fire he negotiated nearly a month ago.

The likely conclusion in Tehran, Gulf governments fear, is that further escalation pays off because Trump is so intent on extricating himself from the war that he will ignore renewed Iranian attacks on America's regional allies.

AMD Profit, Revenue Jump on Growth of Data Center Business

Advanced Micro Devices logged higher profit and revenue in its latest quarter as its data center business continues to boost results.

The chip maker posted a first-quarter profit of $1.38 billion, or 84 cents a share, compared with $709 million, or 44 cents a share, a year earlier.

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Expected Major Events for Wednesday

00:01/IRL: Apr Ireland Services PMI

04:30/NED: Mar Consumer Spending

06:00/DEN: 1Q Consumer credit

06:30/HUN: Mar Preliminary Industrial Production

06:45/FRA: Mar Industrial production index

07:15/SPN: Apr Spain Services PMI

07:45/ITA: Apr Italy Services PMI

07:50/FRA: Apr France Services PMI

07:55/GER: Apr Germany Services PMI

08:00/EU: Apr Eurozone Services PMI

08:00/ITA: Mar Retail Sales

08:30/UK: Apr UK Official Reserves

08:30/UK: Apr S&P Global UK Services PMI

09:00/EU: Mar PPI

09:00/CYP: Apr Registered Unemployed

09:00/LUX: Apr CPI

09:00/POR: 1Q Employment statistics

10:00/FRA: Mar OECD CPI

16:59/POL: Polish interest rate decision

17:59/UK: Mar Adzuna UK Job Market Report

All times in GMT. Powered by Onclusive and Dow Jones.

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This article is a text version of a Wall Street Journal newsletter published earlier today.

(END) Dow Jones Newswires

05-06-26 0017ET